CannabisNewsWire
Editorial Coverage: The growth the legal cannabis market has
created has turned cultivation facilities into invaluable
assets.
- The cannabis market is predicted to generate $146 billion in
revenues by 2025.
- Legal changes are accelerating this expansion in the United
States and beyond.
- Cultivation facilities are fundamental to this growth,
providing the raw materials for the cannabis industry.
Cannabis Strategic Ventures (OTC: NUGS) (NUGS
Profile) recently announced plans to establish a
multi-acre cultivation facility in California to meet market
demands. Tilray Inc. (NASDAQ: TLRY) is increasing
its cultivation space through the acquisition of Natura Naturals
Holdings. In addition, the need to equip cultivation facilities is
fueling growth for hydroponic suppliers such as
GrowGeneration Corp. (OTCQX: GRWG). Aurora
Cannabis Inc. (NYSE: ACB) (TSX: ACB) has issued a letter
of intent to acquire Whistler in an effort to increase cultivation.
Meanwhile, Canopy Growth Corp. (NYSE: CGC) (TSX:
WEED) is looking beyond North America, cultivating new
markets in Europe.
To view an infographic of this editorial, click here.
Cannabis Cultivation Provides Prime
Opportunity
The continuing growth of the cannabis industry has created a
powerful investment opportunity around cultivation sites. These
farms are the bedrock of the industry, producing the raw materials
that are essential to both medical and recreational customers
around the world. Given the balance of supply and demand, companies
with cultivation sites can practically guarantee themselves a
market for their product.
One of the reasons behind the high value of these sites is the
continuing development of cannabis-friendly regulations. State and
federal laws becoming more cannabis friendly, and as that happens,
the industry appears destined for substantial growth.
Potential of the Cannabis Cultivation
Market
The growth of the cannabis sector has led to the rise of
companies such as Cannabis
Strategic Ventures (OTC: NUGS), a holding company for
cannabis industry start-ups and growth-stage enterprises that is
moving into cannabis cultivation in Northern
California. Such companies are keen to talk up the potential of
the cannabis market, and unlike some other sectors, cannabis shows
every sign of living up to the hype.
The global market for legal marijuana was valued at $9.3 billion dollars in 2016. By the end of 2025, the
market is forecast to reach
$146.4 billion. That’s staggering growth for an industry that
didn’t even exist legally a mere 20 years ago and that has only
recently started to attract substantial investor attention.
The largest part of the market is currently medical cannabis and
cannabis-derived wellness products. Medical use provided cannabis
with its foot in the door of the legal economy, thanks to its
applications in providing pain and nausea relief, but the potential
has exploded from there. Legalization has allowed better research
into the effects of cannabis’ active ingredients, in particular
tetrahydrocannabinol (THC) and cannabidiol (CBD). The plant is used
in a wide variety of health and wellness products tailored to
increasingly specific customer bases, such as Cannabis Strategic Ventures’ Fitamins brand, formulated to
relieve muscle pain in athletes.
The breakthrough research is driving demand for cannabis in
various forms. The plant itself can be preserved and smoked for
medical and recreational effects. Plant derivatives are used in a
wide range of pills and ointments. And CBD and THC oils can be
vaped or used in even more products.
As it becomes easier for companies to legally process cannabis,
these companies are exploring making cannabis edibles. The changes
are even fostering a surge in the production of hemp, a variety of
the cannabis plant that doesn’t contain high-inducing quantities of
THC. And in addition to being used in the manufacture of CBD
products, hemp is also used to make textile products.
Legal Changes for Cannabis
The societal clamor for access to cannabis’ derivative benefits
is driving new waves of legislation, including the legalization of
recreational cannabis in several U.S. states as well as countries
such as Uruguay and Canada. Across the United States, 70 to 75
percent of the cannabis trade is reportedly still in the hands of
criminals, while in states with
legalization, only about 30 percent of the activity continues
to be criminal, according to Grand View Research. The potential to
reduce the income of criminals, increase tax revenue and tackle
drug abuse through public health measures are all fueling a
movement that could drive even more radical growth in the legal
cannabis market over the next generation.
The wave of cannabis-friendly legislation has allowed companies
such as Cannabis Strategic Ventures to get their businesses started
and access a broad legal customer base. Other legislation has
maintained a lower profile but is equally important for the
industry. In December, the 2018 Farm Bill belatedly passed through
Congress after months of negotiations. In the process, it lifted the ban on commercial hemp, making it far
easier for cultivators to produce this form of cannabis.
Even in states where the cannabis industry is already legal,
legislation is becoming friendlier towards the industry. The
California legislature has proposed a temporary reduction in taxes
for cannabis businesses to help them make inroads into the illegal
industry. For California-based companies such as Cannabis Strategic
Ventures, this is great news as it frees up capital for further
expansion and provides the incentive to continue operating in a
friendly state.
More Cultivation
Under the circumstances, venturing into production was a natural
move for Cannabis Strategic Ventures. With the industry growing and
the legal landscape looking friendlier than ever, the company is
preparing to break ground on a major new cannabis
cultivation site.
The six-acre site in Northern California — dubbed the NUGS Farm
— will establish the company as a direct producer and position it
to make the most of the potential the market has to offer.
“Establishing the NUGS Farm and securing these licenses are
significant milestones for Cannabis Strategic Ventures,” said Simon
Yu, CEO of Cannabis Strategic Ventures. “As the cannabis industry
expands, and as we work to make cannabis legal on a federal level,
Cannabis Strategic Ventures will be in position to touch on all
areas of cannabis production.”
Though the main purpose of the farm will be to cater to
Californian cannabis users, the largest market for the plant in the
United States, the move is also a significant step toward wider
operations.
“They say that the way California goes, the direction of the
country goes,” added Yu. “We are optimistic that federal
regulations will become more cannabis friendly in the near future
and are excited for the positive impact it can have on our
company.”
With more than 20 licenses for the cultivation, manufacturing
and distribution of cannabis within California, Cannabis Strategic
Ventures appears to be perfectly positioned to leverage
opportunities within the state. In addition, these strategic moves
may ideally prepare the company for expansion prospects throughout
the rest of the country.
The Rise of the Cannabis Companies
The changing cannabis landscape has led to the emergence of
several major players in the industry.
Many of the most important companies are based in Canada, where
federal-level legalization and a large market for cannabis have
made it easier for businesses to develop. Tilray Inc.
(NASDAQ: TLRY) is one of the industry leaders, a pioneer
in the cultivation, production and distribution of cannabis and its
derivatives. With affiliates and subsidiaries in Europe, Australia,
New Zealand and most recently Latin America through Tilray Latin America SpA, the company is
developing a global presence. It is also expanding within Canada
and has recently announced a pending acquisition of
Natura Natural Holdings Inc., a multimillion deal that will
give Tilray an extra 662,000 square feet of growing space.
The rise of cannabis companies is proving a boon for the
suppliers of cultivation equipment as well, especially those
specializing in hydroponics. Among those to profit is
GrowGeneration Corp. (OTCQX: GRWG), a seller of
hydroponic systems and the associated nutrients. Like Tilray,
GrowGeneration has developed enough financial power to use
acquisition as a route to growth. It recently obtained all the assets of Denver-based Chlorophyll
Inc., increasing its influence across the United States.
Another of the big Canadian companies, Aurora Cannabis
Inc. (NYSE: ACB) (TSX: ACB), has also demonstrated the
importance of increasing cultivation space. A large part of the
rationale behind its recently announced
letter of intent to acquire Whistler was the desire to get hold
of that company’s two production facilities. These facilities are
expected to produce 5,000 kilograms of quality cannabis a year,
providing Aurora an avenue to increase its market share.
Canopy Growth Corp. (NYSE: CGC) (TSX: WEED) is
looking beyond its immediate market. Though legalization is not as
widespread in Europe as in North America, change is also expected
there in the long term, and the company is positioning itself to
make the most of this. It has established
subsidiaries in the United Kingdom and Poland to make the most
of the very different situations in those two countries. In Poland,
the company has passed through a regulatory process that will allow
it to import and sell its cannabis in the country for medical use.
In the United Kingdom, where the door has only just opened a crack
to the use of cannabis derivatives in the most extreme medical
cases, the company has formed a joint venture with a local research
group, placing Canopy Growth as one of the first cannabis companies
operating in the United Kingdom.
The market for cannabis is expanding as attitudes and laws
change. This momentum may drive a need for more product and thereby
provide promising opportunities for companies with cultivation
facilities.
For more information on Cannabis Strategic Ventures, visit
Cannabis
Strategic Ventures, Inc. (NUGS)
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